Bargain-hunters boost Footsie in thin trading

After another brutal week on the stock market, punch-drunk investors were today grateful for a chance to regroup and find time to contemplate the future.

Turnover slowed to a trickle, with sentiment receiving a mild boost from a rally in Hong Kong this morning. This enabled share prices to gain ground on a mixture of bargain-hunting and short closing of positions despite another post-election sell-off in New York overnight.

The FTSE 100 index rose 93.1 to 4365.5 and has risen 700.3 points, or 16%, since hitting its low point for the year on 27 October. Total market turnover was less than three billion shares by late afternoon.

This afternoon Wall Street also set about clawing back some of its post election losses, the Dow rising 150.5 points to 8846.3 in thin trading. This was despite the latest non-farm payroll figures, which showed a drop of 240,000 in the number of people employed. It takes US unemployment up to its highest level for 14 years.
While yesterday's dramatic cut of 1.5 percentage points in interest rates to 3% looked good on paper, the benefits may not be that easy to realise. This afternoon some lenders reluctantly agreed to pass on the rate cut in full after coming under intense pressure from the Government.

Dealers agree that lower rates will make it easier for the Government to issue gilts more cheaply and raise funds in order to spend its way out of recession. The International Monetary Fund has said the UK will be among the countries worst hit by the recession.

British Airways led blue-chips higher with a rise of 14.8p to 145.3p despite the collapse in half-year profits. Dealers breathed a sigh of relief and said the figures could have been a lot worse. The airline now hopes to make a small profit for the year, compared with earlier expectations of a loss.

TUI Travel rose 8.6p to 194.5p while Thomas Cook firmed 3.3p to 178.6p despite Shore Capital downgrading both from buy to neutral because it is worried about the collapse in consumer confidence and its impact on prospects. It says both companies will have hedged against rising fuel costs, and will not have benefited from the drop in the price of crude to below $60.

Carphone Warehouse put on 1¾p to 149p even though JPMorgan cut its target for the group from 262p to 190p. It says Carphone still has a strong balance sheet and is well-positioned but, with growing competition, investors are asking where earnings and strategic direction are heading.

Any growth in broadband will be offset by continued Carrier Preselect customer losses and an AOL broadband division in decline. JPM has repeated its neutral rating on the shares.
The lurch towards cheaper money is expected to provide a boost to hard-pressed retailers. Next, which failed to impress with its latest trading update earlier this week, rallied 46p to 1177p. Kingfisher put on 5.2p at 127.5p.

The fallout from yesterday's disastrous drop in profits at 3i, down 29¼p at 485¾p, continued to be felt. Dresdner Kleinwort has slashed its target from 1385p to 950p, but has repeated its buy rating on the shares. The broker attributes most of the trouble in the first half to the sharp deterioration in the stock market and the global macro-economy. The slowdown in the number of deals undertaken, means the second half will be more challenging.

A burst of speculative buying lifted JJB Sports 3¼p to 38½p. Whispers in the market place claim Pentland Industries may have run its eye over the replica football shirts retailer. Pentland is also the biggest shareholder in JD Sports, up 6p at 264p, with 57% of the company. The speculators say such a deal would make sense, allowing Pentland to pick up JJB on the cheap. JJB and JD Sports were early casualties of the collapse in consumer confidence.